Meeting of the Expert Group “Real federalism, local self-government, interbudgetary policy”

The Expert Group for preparation of proposals on urgent problems of Russia’s socio-economic strategy for the period through 2020 on the direction “Real federalism, local self-government, interbudgetary policy” (Group №12) held its meeting on 24 March. At the meeting, the Expert Group discussed a report, which concerned assessment of the current situation in the area of federalism and local self-government, among other things.

The experts suggest that the crisis of the system in question has become fairly intense. The bottom line is not an excessive centralization which could be remedied by fostering decentralization and democratic mechanisms. The report cites main factors that drive a deep crisis of federalism, including:
  • The absence of new rules of the game in the government, business and the society on the whole and the collapse of the current rules of the game, which determines prohibitively high transaction costs and unpredictability of results of any productive activities, including those in the public administration area, in particular;
  • Degradation of the subnational elites’ capacity to champion territorial development as a result of their having lost qualifications and due to a biased motivation vis-a-vis their strengthening capacity to champion their personal and group interests that rest upon a close intertwining between public administration, a privileged fraction of business and siloviki;
  • The absence of the societal consensus on positive programs against the background of growing protest (populist, nationalist) sentiments and the absence of real opportunities for the population to express their views in the frame of the existing institutional system.
The authors of the document believe that under such circumstances no improvement of individual instruments of federative relations, including interbudgetary ones, per se is likely to form a radical remedy of the situation.

The report also evaluates possible scenarios from the perspective of political mechanisms of federalism, including:
  1. Preserving the status quo;
  2. Further intensification of centralization in the political and economic sphere;
  3. Primary regalvanizing of democratization processes, including an immediate re-institution of gubernatorial elections together with autonomy of each of tiers of government, and a broad decentralization of powers and finance;
  4. Administrative decentralization and re-establishment of the rules of the game along with a gradual return to democratic mechanisms at all the levels of government;
  5. Fostering public governance mechanism under a limited decentralization and democratization.

Most experts advocated an in-depth study into two scenarios - namely, the one suggesting an immediate decentralization and the scenario of the administrative decentralization with a gradual return to democratic mechanisms on all the levels of government.

The final document comprises findings of a study into the Russian interbudgetary relations system and interbudgetary policy proposals. Specifically, the experts proposed measures on beefing up the regional and local budgets’ financial autonomy, assigning additional revenue sources to the regional and local levels, promoting stability and transparency of the interbudgetary relations system.

The moderate scenario suggests revamping fundamentals of the tax system and a cardinal modification of the interbudgetary transfers system. The radical scenario envisages a substantial decentralization of revenues, bolstering the tax system’s flexibility, and a substantial advancement of the regional and local authorities’ financial autonomy.